The company achieved operating income of 2.65 billion yuan in 2023, an increase of 10.4% over the previous year, and achieved net profit of 490 million yuan, an increase of 28.3% over the previous year. 24Q1's revenue and net profit to mother fell 12% and 33%, respectively, and faced challenges in an environment of weak consumption recovery. The company plans to pay a dividend of 380 million, with a dividend rate of about 77.1%.

By brand, the revenue of DA, DM, DZ, and RA increased by 8.9%, -7.4%, 14.5%, and 56.1%, respectively in 2023; with the exception of DM brands, each brand's gross margin declined to varying degrees. Among them, DA, DZ, and RA fell 1.1, 0.5, and 0.2 pct year on year, respectively, while DM increased slightly by 0.1 pct year over year.

By channel, online channels performed well in 2023. In terms of revenue, online and offline revenue increased 29.5% and 7.7%, respectively, in 2023, with offline direct sales and distribution increasing 10.6% and 4.8%, respectively. In terms of gross margin, online channels also performed better than offline channels. In 2023, the gross margin of online channels increased by 1 pct year on year, and offline channels fell 1.2 pct year on year. Among them, the gross margin of offline direct management and distribution fell 1.4 and 1.3 pct year on year.

Looking at 2024Q1, the company's revenue fell 12% year on year. Looking at the breakdown, DA, DM, and DZ fell 16.2%, 10.1%, and 7.2% year over year, respectively. Only RA increased slightly by 2.3% year on year. We speculate that on the one hand, it is related to the net closure of stores in 2023, and on the other hand, it may be due to the weak retail environment of high-end women's clothing terminals. At the same time, the gross margins of various brands also declined. The gross margins of DA, DM, DZ, and RA fell 0.3, 0.4, 2.2, and 1 pct, respectively.

From a channel perspective, the decline in online revenue in 24Q1 was less than offline, with both falling 4.7% and 13.2%, respectively.

The quality of operations remains at a good level. By the end of 2023, the company's inventory turnover was 204 days, down 9 days from the previous year, and the net cash flow from operating activities was 700 million, compared to 496 million in the same period last year.

Looking ahead to 2024, the company plans to integrate into the DZ omnichannel retail division, accelerate the integration of online and offline resources, drive growth and further improve operational efficiency, and look forward to the accelerated growth of the DZ brand in the future. At the same time, the company will also continue to increase investment in informatization and digital intelligence construction to improve overall operational efficiency. As a leading domestic women's clothing company, the company has excellent reporting quality, steady operation, and a basic brand matrix. We acknowledge the company's medium- to long-term competitive resilience in the industry and the investment value brought by continued high dividends.

According to the annual report and quarterly report, we adjusted the profit forecast and introduced the 2026 profit forecast. The company's earnings per share for 2024-2026 are 1.1, 1.26, and 1.45 yuan (the original 2024-2025 was 1.31 and 1.54 yuan), respectively. Referring to comparable companies, the corresponding target price was 14.24 yuan. Considering the growth pressure in the first quarter and the short-term operating pressure of the high-end women's clothing industry, the rating was lowered to an “gain” rating.

Risk warning: increased competition in the industry, weakening demand for terminal consumption, etc.